TaxTMI 
TaxTMI 
2019 (3) TMI 1126
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....r Section 143(3) of the Act on 26.2.2014 and assessed the assessee's total income at Rs. 63.55 crores under the normal provisions. To reopen such assessment, the Assessing Officer issued the impugned notice. In order to so, he had recorded following reasons:- "1. The return of income has been filed electronically on 29.11.2011 declaring total income of Rs. 55,49,31,710/- under normal provision and Book Profit of Rs. 71,08,52,520/- under Section 115JB of the Act. Assessment under section 143(3) of the Act was completed on 26.02.2014 determining income at Rs. 63,55,78,600/under normal provision of the Act and Rs. 62,35,14,920/- under section 115JB. 2. Disallowance of prior period expenditure amounting to Rs. 11,34,234/- 2.1 Assessee claimed an amount of Rs. 11,34,234/- being the prior period expense under the head miscellaneous expenses. This being the expenditure in the nature of prior period expense is not allowable in the year under consideration and the same is required to be disallowed. In the computation filed as well as in the concluded assessment, this amount has not been disallowed resulting in under assessment of Rs. 11,34,234/-. 2.2 In view of above, it is conclude....
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....ng authority from treating it as a trading receipt (CIT Vs Bazpur Cooperative Sugar Factory Ltd. 1988 172 ITR 321, 329(SC), Khattar Kiln Co. Vs CIT 1983 140 ITR 425, 428 Punj). The matter of taxability cannot be decided on the basis of the entries which the assessee may choose to make in his accounts but has to be decided in accordance with the provisions of law (CIT Vs Mogul Line Ltd. 1962, 46 ITR 590 600 (Bom). 3.6 If the true income from profits and gains cannot properly be ascertained on the basis of the assessee's method, the income must be computed upon such basis and in such manner as the AO may determine (CIT Vs. McMillan & Co. (1958) 33 ITR 182, 187(SC), CIT Vs. British Paints India Ltd (1991) 188 ITR 44 (SC). 3.7 Therefore, the income of the assessee's under assessment by sum of Rs. 4188.90 lakh which reflects the amount which has already become due to the assessee in terms of the contracts but is not accounted in the profit and loss account. 3.8 In the balance sheet under head current assets, the assessee has shown amount recoverable from customers at Rs. 11910.99 Lakh. This amount represents excess of aggregate sale proceeds recognized over the progress billi....
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....ding assessment year 2010-11, having reopened the assessment, had passed the order of re-assessment on 29.5.2017 in which no additions under this head was made. Thus, clearly, the Assessing Officer agreed in law that no addition was sustainable. 4. On the other hand, learned counsel Mr. Malhotra appearing for the department opposed the petition contending that the Assessing Officer has recorded proper reasons for issuing notice. The ground on which the notice of reopening is issued cannot be said to have been examined during the original scrutiny assessment. The petitioner had failed to disclose truly and fully all material facts. 5. Having thus heard the learned counsel for the parties and having perused the documents on record, we may recall that the impugned notice has been issued beyond the period of four years from the end of relevant assessment year. The question of failure on the part of the assessee to disclose truly and fully all material facts, therefore, becomes relevant. We may, therefore, bear this aspect in mind while examining the material on record. Further as per settled law, if a certain claim had already been examined by the Assessing Officer in the original as....
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....planation on provision for warranty of Rs. 408.11 lac The assessee has charged the above sum in the Profit& Loss account. In the instant case, it appears that the provision for performance warranties made by the Company is on the basis of technical assessment by the management considering the possible defects or performance failures with the likely costs for correcting such defects or failures. Considering the global policy and based on the detailed technical assessment, the Company have made a provision of 1% of sales value for such likely expenditure. In respect of allowablity of the provisions for warranty the decision of Supreme Court in the case Rotork Controls India (P) Lid. v. CIT (2009) 314 ITR 62 may be referred where it has been held that the warranty provision is in the nature of ascertained liability and therefore an allowable deduction under the Income Tax Act. The said decision is discussed hereunder in brief: " The assessee company was engaged in the business of valve actuators. At the time of sale, the assessee provides a standard warranty whereby in the event of any Beacon Rotork Actuator or part thereof becoming defective, the assessee company undertakes to rect....
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....ng part of the accounts ending on 31.3.2011, the assessee had in this respect made following disclosures:- "(J) Revenue Recognition:- Sales, other than long term contracts are recognized on dispatch of goods. Sales are not of Value Added Tax. The Excise Duty recovered is presented as a reduction from gross sales. Revenues from long term contracts are recognized on the percentage of completion method, in proportion that the contract cost incurred for the work performed up to the reporting date bear to the estimated total contract costs. Construction contracts are accounted for in accordance with the Accounting Standard 7 on Accounting for Construction contracts. When the outcome of a construction contract can be estimated reliably, contract revenue and contract costs associated with the construction contract are recognized as revenue and expenses respectively by reference to the stage of completion of the contract activity at the reporting date, (the percentage of completion method). At each reporting date, the contracts in progress (Progress work) is valued and carried in the Balance Sheet under Current Assets. Advance and progress payments received from customers during the c....
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....s been taken by the assessee in the petition However, the order of reassessment dated 29.12.2017 was not produced earlier which he has now tendered which is taken on record. Perusal of this order would show that the notice of reassessment in the said case was, besides others, was based on following grounds:- "2. Amount due to customers on construction contracts not offered for taxation: 2.1 The assessee has shown in the balance sheet under the head 'current liabilities and provisions' as 'due to customers' at Rs. 35.33 crores. This amount is nothing but the difference in bills raised by the assessee and sales booked by the assessee in its books of accounts. It is seen that the bill has already raised but this income was not offered by assessee. It is seen that assessee can raise bill only when it is entitled to do so as per the terms of contract on reaching certain milestone. 2.2 The cost incurred by the assessee in respect of the above projects till reaching of certain stages was actually debited by the assessee in the profit and loss account. The assessee has explained in note (J) of schedule K-notes on accounts that as per accounting standards it has booked sa....